Section 203(b) is the centerpiece
of FHA's single-family mortgage insurance programs, the successor
of the program that helped save homeowners from default in the
1930s, helping to open the suburbs for returning veterans in
the 1940s and 1950s. That helped shape the modern mortgage finance
system.
Today, FHA One- to Four-Family Mortgage Insurance is still an
important tool through which the Federal Government expands homeownership
opportunities for first-time homebuyers and other borrowers who
would not otherwise qualify for conventional mortgages on affordable
terms, as well as for those who live in underserved areas where
mortgages may be harder to get. These obligations are protected
by FHA's Mutual Mortgage Insurance Fund, which is sustained entirely
by borrower premiums.
This program provides mortgage insurance to protect lenders
against the risk of default on mortgages to qualified buyers.
Insured mortgages may be used to finance the purchase of new
or existing one- to four-family housing, as well as to refinance
debt. Section 203(b) has several important features:
- Down payment requirements can be low. In contrast to conventional
mortgage products, which frequently require down payments of
5 percent or more of the purchase price of the home, single-family
mortgages insured by FHA under Section 203(b) make it possible
to reduce down payments to as little as 3.5 percent. This is
because FHA insurance allows borrowers to finance approximately
96.5 percent of the value of their home purchase through their
mortgage, in some cases.
- Some fees are limited. FHA rules impose
limits on some of the fees that lenders may charge in making
a mortgage. For example, the mortgage origination fee charged
by the lender for the administrative cost of processing the
mortgage may not exceed one percent of the amount of the mortgage.
- HUD
sets limits on the amount that may be insured. The current
FHA mortgage limit for one-unit dwellings ranges from $271,050
to $729,750 depending on geographic location.
Eligible Customers:
Anyone intending to use the mortgaged property as their primary
residence is eligible to apply and be considered for an FHA insured
mortgage through FHA-approved lenders.
Application:
Any person can apply for an FHA insured mortgage. The program
is limited to owner-occupants.
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